### No. 13123 IN

### THE SUPREME COURT OF THE STATE OF MONTANA 1975

BILL McCARTER, Plaintiff and Respondent,

GLACIER GENERALASSURANCE COMPANY, Defendant and Appellant.

Appeal from: District Court of theNinth JudicialDistrict, Honorable Frank Blair, Judge presiding. Counsel of Record : 

### For Appellant: 

### Alexander, Kuenning, Miller & 

### Ugrin, Great Falls,

Montana John 

### H. Kuenning argued, Great Falls, Montana For Respondent: Morrow, Nash and Sedivy, Bozeman, Montana Edmund P. Sedivy argued, Bozeman, Montana

Submitted: December 3, 1975 Decided: 

### FEfj

## 10'lQ-76 .,'Mr. Justice Frank I. Haswell delivered the Opinion of the Court. An insured farmer sued his insurance company torecover payment for losses allegedly due under two crop insurance policies. The district court of Toole County, Hon. Frank E. Blair, district judge presiding without a jury, awarded judgment tothe insured farmer inthe amount of $121,640.20, interest and costs. Defendant insurer appeals from thisjudgment. Plaintiff 

### isBillMcCarter, a farmer who 

### raises winter and spring wheat on lands inToole County, Montana. For several years prior toand including 1973, he insured hiscrops against hail damage and other riskswith the Federal Crop Insurance Cora poration. In late 1972 and early 1973 he applied for and purchased additional crop insurance from the defendant, Glacier General Assurance Company. In his application for the additional Glacier Insurance, McCarter disclosed that he had other crop insurance covering the

same perils, viz. Federal Crop Insurance. The Glacier Insurance

was referred to

### as Multiple Peril Crop Insurance. It covered not only the standard hail and firerisks (designated "A" perils), but also losses due toweather conditions such 

### as drought, flooding, freezing, windstorms and the like (designated "B" perils). McCarter paid 

### a separatepremium for coverage of "B" perils. "B" perils, unlike "A" perils, were subject toa pro rata clause limiting the insurer's liability to that proportion of the loss that the amount of 

### its insurancebears tothe total insurance. Glacier issued two Multiple Peril Crop Insurance policies toMcCarter. One policy covered winter wheat and the other covered spring wheat. Each policy covered both "A" and "B" perils. McCarter paid 

### allpremiums for both policies. He

### was charged the

same premium he would have been charged had he not carried the Federal Crop Insurance. In 1973McCarter suffered severe losses to his winter andspring wheat from drought. Settlement for these losses under his Glacier policies could not be effected, however, and the instant action resulted. The case

### was submitted to the districtcourt for decision

on the basis of an agreed statement of facts, four depositions, and the testimony of McCarter and another area farmer atthe trial. The material facts are largely undisputed. The chief battleground concerns essentially legal questions, principally the validity and construction of the pro rata clause inthe Glacier policies. The districtcourt held the pro rata clause inthe policies unlawful, void and unenforceable. McCarter was awarded judgment

as though the policies contained no pro rata clause. The amount of the judgment was $121,640.20. The districtcourt made an additional and alternativeconclusion of law that if the pro rata clauses inthe two policies were valid, the clauses should be interpreted and construed torequire a totalpayment of $112,213.70. Glacier appeals from the judgment. The issues on appeal 

### can be summarized inthis fashion: (1)Is the pro rata clause inthe Glacier policies void and unenforceable? (2) If not, how should 

### it be interpreted, construed and applied? Glacier contends that the pro rata clause covering "13" perils isvalid and enforceable for a variety of reasons: 

### (1)It does not contravene Montana's unfair discrimination statute or public policy, (2) pro rata clauses arenot unlawful per se, (3) the policy forms, 

### rate structures and benefit schedules

### were approved by the insurance commissioner, and (4) McCarter has failed to carry his burden of proof that the clause 

### is invalid. AdditionallyGlacier argues that the insurance would not have been writtenwithout thepro rata clause, and the court should not 

### rewrite the policy contrary tothe intention of the parties. Section 40-3512 (3)

## , R.C.M. 1947, Montana's unfair discrimination statuteprovides inpertinent part: "No such insurer shallmake orpermit any unfair discrimination either between insureds or property having like insuring orrisk characteristics

## * * * inthe premium or rates charged for insurance, or inthe dividends or other benefits payable thereon, or inany other of the terms and conditions of the insurance." The purpose of such unfair discrimination statutes 

### is to establish and maintain uniform rates of insurance. 

### 44 C.J.S., Insurance, g 342, p. 1308. The charging of excessive premiums constitutes discrimination against the insured. Fogg v. Morris Plan Ins. Soc., 188 N.Y.S. 867; 5 Couch on Insurance 2d, 

### 5 30:60, p. 579; 43 Am Jur 2d 559. Here McCarter was charged the same premium asanother insured who carried no other crop insurance, but the benefits payable tohim would be only a part of those payable toanother insured without other crop insurance. There is a 

### clear violation of the unfair discrimination statuteunder such circumstances and the districtcourt so found: "5. That 

### as between McCARTER, who carried other multiple peril crop insurance upon his crops, and any other insured farmer likeMcCARTER, but who did not carry other multiple peril crop insurance upon his crops, the two insureds had likeinsuring and risk characteristics, and GLACIER did cause to be made and permitted unfair discrimination between such insured inoffering topay substantially 

### less benefits toMcCARTER than those tobe paid toother insureds for the same losses, but who had no other multiple peril crop insurance, allby virtue of the inclusion of the pro-rata clause inthe policies of insurance inquestion." This makes the pro rata clauseunlawful in the instant case as it is "Contrary tothe policy of express 

### law, though not express

### lyprohibited. " Section 13-801(2), R.C.M. 1947. Glacier next argues thatpro 

### rata clauses arenot unlawfulper set but on the contrary arevalid and enforceable. This

### is clearly the 

### law. 16 Couch on Insurance 2d, 

### 5 62:26, and

cases cited therein. But this argument 

### is irrelevant. The vice here 

### is thatMcCarter 

### was charged 

### a premium based on "full risk" insurancewhile the policy provided only forproportional

or pro rata payment of the loss. Glacier's agent, Russell, 

### testified that thepremium structure formultiple peril crop insurance

was established by company actuaries tocover 

### a full loss tothose insureds who had no other insurance. The agreed facts statethat Glacier charged the same premium toan insured regardless of whether or not he had other crop insurance, and thatMcCarter 

### was charged the same premium that he would have been charged had he not carried Federal Crop Insurance. The districtcourtprovided



### as 

### a finding of fact: "4. That the premium charged McCARTER by GLACIER on the insurance policies inquestion was fixed and determined by GLACIER'S actuaries inan amount so astocover a fullrisk of loss to an insured under thepolicies, who had no other insurance coverage, including Federal Crop Insurance coverage, topro-rate with GLACIER'S policies." Although pro 

### rata clauses arenot unlawful per se, such clause isunlawful here because a "fullrisk" premium was paid and only a partial recovery was possible under the pro rata clause. The approval of thepolicy forms, 

### rate structure, and benefit schedule by the office of the insurance commissioner does not validate an otherwise invalid pro 

### rata clause. Sullivan and Miller v. Doe, 159Mont. 50, 495 P.2d 193. Finally Glacier argues thatMcCarter has not carried his burden of proving the pro rata clause invalid here. The basis of thiscontention is that McCarter produced no evidence of the absence of a rational basis for differentiating between insureds who have no other crop insurance and insureds having additional crop insurance, and accordingly theremay 

### wellbe 

### a reasonable basis for charging both the same premium. Sufficeit to say that therecord discloses the same premium charged both classes of insureds with one 

### class being paid substantially higher loss benefits than the other. This constitutesprima facie evidence of excessive premium charges toinsureds with like insuring or risk characteristics and thedistrictcourt so found

# . Our holding on the firstissue renders consideration of the second issueunnecessary. Judgment affirmed.

Justice